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Why Won't Local Search Carry Its Weight?

  |  August 16, 2004   |  Comments

Search engines are looking to local search advertising for growth. Unless the engines make one big change, they won't find it.

At the recent Search Engine Strategies, Yahoo launched the latest missile in the war to dominate local search. Yahoo Local asks users to visit a special search page and type in both a search term and a geographic indicator, such as a Zip Code or city name.

Yahoo Local is basically just Google Local, which launched back in March, with a different background color. And that's not necessarily a compliment: Neither Google Local nor Yahoo Local can find more than one bike shop within a mile of my house. I know for a fact there are at least four.

If local search doesn't work that well, why's it getting so much attention from search engines? Because they know search advertising is starting to mature, and the huge growth we've seen for several years is starting to slow down.

In 2003, the search marketing industry grew by 65 percent to $1.9 billion. This year, it'll grow by 34 percent to $2.6 billion. In 2009, the industry will grow 11 percent to $5.5 billion. Those are all very big revenue numbers and very respectable growth rates. But with Google poised to go public at any moment and Yahoo already struggling to please investors, declining growth rates don't look good. The engines need to find new growth sources.

Problem is, as things stand local search doesn't look like it can provide the growth Google and Yahoo are looking for. According to our latest Jupiter Research Paid Search Forecast, local search marketing will generate $502 million in 2004. That's just 19 percent of the total search marketing spend. Local search spending is actually growing more slowly than the rest of the industry. In 2009, local search will bring in $879 million, or only 16 percent of the total search marketing spend.

Two primary factors keep the local search market from taking off. First, consumers aren't searching locally. The local search tools on the market are pretty underwhelming at this point. Most users could replicate my bike shop example in their own neighborhoods, with pizza parlors, barbershops, or any other business type. As a result, consumers aren't searching. Only 4 percent of searchers say local search availability attracts them to a search engine, ranking it among the least-demanded search engine features. When consumers do use local search, it's mostly to find known merchants, not discover new ones.

Second, the biggest local advertisers aren't online. The Yellow Pages, which controls a big part of offline local ad spend, is dominated by physicians, restaurants, and automotive repair. These businesses really don't know how to advertise online. They don't want click-throughs or online leads; they want phone calls and foot traffic. Until search engines can deliver offline leads, local search marketing doesn't appear very attractive to these advertisers.

What can the engines do to make this market grow more quickly? They must make lots of changes. They have to build the local databases so I can find all the bike shops in my neighborhood. And they must find a way to drive offline leads to local advertisers.

But the first, most important change has to be putting local search on the home page. All search engines, particularly Google, hate the idea of changing their primary search boxes. But if they expect consumers to use local search tools, they must make those tools easy to find and easy to use. After years of typing www.google.com and www.yahoo.com, users won't likely flock to brand-new URLs to conduct local searches. The engines will have to buck up and put that second geographic search box on their home pages if they want consumers to search this way.

Without that one big change, local search will never take off, and search engines will never find the growth they crave.

Want more search information? ClickZ SEM Archives contain all our search columns, organized by topic.

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Nate Elliott Nate Elliott covers online advertising as an associate analyst for Jupiter Research. He is regularly cited in the media as an expert on rich media, search marketing, and ad serving technology. Prior to joining Jupiter, Nate was DoubleClick's Senior Manager for Rich Media and manager of the DoubleClick Studio design team, roles in which he worked with clients such as AT&T, Kraft, General Motors and IBM. Nate founded and co-chaired the IAB Rich Media Task Force, the group that set the first industry standards for rich media advertising. He has also worked for Macromedia, driving the Flash Multi-Tracking Kit as de facto industry standards for tracking clickthroughs and other interactions within Flash ads. He isregularly cited in the New York Times, the Wall Street Journal and elsewhereas an industry expert.

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